Governance and trust : The profound test of sustainability

Corporate governance innovation, crisis and reform are essentially cyclical. Reflecting the mood of the wider economy, during long periods of innovation, expansion and apparent economic success, active interest in governance diminishes. Companies and shareholders are more concerned with the generation of wealth, rather than in ensuring governance mechanisms are working appropriately to ensure that wealth is generated responsibly, mechanisms are in place for the retention of wealth with integrity, and that wealth is used for agreed purposes. Traditionally little attention is paid to the impact of economic activity on the society and environment that are marginalised as externalities. During waves of innovation the sense of creative destruction reigns, everything is possible, almost anything is permissible, because there is really serious money to be made if imagination and enterprise are unleashed. Waves of corporate governance reform and increased regulation occur during periods of recession, corporate collapse, and the sudden recognition of the costs and dangers of social and environmental damage. This realisation leads to a hasty re-examination of the viability of regulatory systems with a renewed focus on the vital importance of high standards of corporate governance, integrity and social and environmental responsibility. The greatest economic challenge all the world now faces is that of climate change. New modes of governance to deliver sustainable value creation are a crucial test of the governance of corporations.  

Thomas Clarke

Professor Thomas Clarke is a Fellow of the Royal Society of Arts, and presently Visiting Professor at the Toulouse Business School (Barcelona). He is the editor of The Oxford Handbook of the Corporation (OUP 2019) and author of Corporate Governance: Cycles of Innovation, Crisis and Reform, (Sage 2022).

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